SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1994
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
Commission file number 1-3024
GRUMMAN CORPORATION
(Exact name of Registrant as specified in its Charter)
NEW YORK 11-0844750
(State or other jurisdiction of (I.R.S Employer
incorporation or organization) Identification No.)
Bethpage, Long Island, New York 11714
(Address of principal executive offices)
Registrant's telephone number, including area code
(516) 575-0574
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months, and (2) has been subject to
such filing requirements for the past 90 days. Yes X No____
Number of shares of Common Stock Outstanding at
April 30, 1994 - 34,348,621
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
GRUMMAN CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
(In Thousands Except
Per Share Amounts)
Three Months Ended March 31,
1994 1993
Revenue
Sales $637,994 $864,577
Other Income 6,161 7,194
644,155 871,771
Costs and Expenses
Cost of sales 564,348 781,528
Selling, administrative and other 27,213 27,776
Interest 7,056 11,147
598,617 820,451
Income before merger related costs 45,538 51,320
Merger related costs 60,000 -
Income (loss) before income taxes (14,462) 51,320
Provision (credit) for federal income
taxes (5,100) 17,100
Net income (loss) from continuing
operations (9,362) 34,220
Income (loss) from discontinued
operations - (6,700)
Net Income (loss) $ (9,362) $ 27,520
Primary earnings (loss) per share:
Continuing operations $(.27) $1.00
Discontinued operations - (.19)
Net income (loss) $(.27) $ .81
Cash Dividends per Share of
Common Stock $ .30 $ .25
The accompanying notes are an integral part of these financial
statements.
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GRUMMAN CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(In Thousands)
March 31, December 31,
1994 1993
(Unaudited)
Assets
Current Assets
Cash and cash equivalents $ 286,939 $ 346,090
Marketable securities 27,819 18,034
Accounts receivable 557,260 518,731
Inventories, less progress payments 517,630 499,436
Prepaid expenses 54,222 40,992
Total current assets 1,443,870 1,423,283
Property, Plant and Equipment,
less accumulated depreciation 364,179 372,723
Non-Current Assets
Deferred income taxes 111,774 120,028
Long-term receivables 11,771 6,009
Investments 52,107 52,505
Other 50,358 49,901
226,010 228,443
Total $2,034,059 $2,024,449
Liabilities and Shareholders' Equity
Current Liabilities
Short-term debt $ 6,716 $ 6,571
Accounts payable 144,968 147,576
Wages and employee benefits payable 169,142 90,229
Income taxes 74,680 88,932
Advances and deposits 70,615 95,340
Other current liabilities 112,826 89,699
Total current liabilities 578,947 518,347
Long-Term Debt 241,093 243,106
Liability for retiree health benefits 301,252 304,752
Restructuring reserve 65,000 85,000
Other Liabilities 31,395 37,191
Common Stock - $1.00 par value,
authorized 80,000,000 shares;
outstanding 34,000,294 and 34,049,475
shares (net of treasury stock) 344,590 344,589
Retained Earnings 471,782 491,464
$2,034,059 $2,024,449
The accompanying notes are an integral part of these financial
statements.
2
GRUMMAN CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
(In Thousands)
Three Months Ended March 31,
1994 1993
Cash flows from operating activities
Net Income (loss) $ (9,362) $ 27,520
Items affecting cash from operations:
Depreciation and amortization 16,472 19,298
Merger costs 60,000 -
Changes in assets and liabilities:
Decrease/(increase) in:
Accounts receivable (38,529) (51,741)
Marketable securities (9,785) -
Inventories (18,194) 35,161
Prepaid expenses (13,230) (16,572)
Increase/(decrease) in:
Accounts payable, wages and employee
benefits 16,305 28,033
Income taxes payable (5,998) 14,229
Other current liabilities 3,127 (21,194)
Other (40,589) 3,988
Net cash provided/(required) by
operating activities (39,783) 38,722
Cash flows from investing activities
Capital expenditures (8,243) (9,880)
Proceeds from sale of capital assets 1,738 731
Increase in investments - 4
Net cash used in investing activities (6,505) (9,145)
Cash flows from financing activities
Repayment of long-term debt (1,868) (76,785)
Dividends paid (10,186) (8,410)
Other stock transactions (809) 7,263
Net cash required by financing activities (12,863) (77,932)
Decrease in cash and cash equivalents (59,151) (48,355)
Cash and cash equivalents - January 1, 346,090 299,077
Cash and cash equivalents - March 31, $286,939 $250,722
The accompanying notes are an integral part of these financial
statements.
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GRUMMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The interim financial statements include all adjustments which are,
in the opinion of management, necessary to a fair statement of the
financial position and results of operations for the three months ended
March 31, 1994 and 1993. Such adjustments are of a normal and
recurring nature. The financial statements should be read in
conjunction with the summary of significant accounting policies and
notes to financial statements included in the Company's annual report
to shareholders for the year ended December 31, 1993.
2. Property, Plant and Equipment (at cost) is summarized as follows:
(In thousands)
March 31, December 31,
1994 1993
Land $ 11,954 $ 11,954
Buildings 316,157 316,029
Machinery and equipment 969,633 967,773
Leasehold improvements 52,400 51,437
Construction in progress 13,392 12,897
1,363,536 1,360,090
Less accumulated depreciation
and amortization 999,357 987,367
$ 364,179 $ 372,723
3. Inventories are summarized as follows:
Work in process $1,108,525 $1,081,923
Raw materials, purchased parts
and supplies 83,061 82,158
1,191,586 1,164,081
Less progress payments 673,956 664,645
$ 517,630 $ 499,436
4. Cash flow supplemental information: (In Thousands)
Three Months Ended March 31,
1994 1993
Cash paid/(refunded) during the three
months ended March 31, for:
Interest (net of amount capitalized) $ 11,988 $ 22,217
Federal income taxes $ (1,337) $ 500
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5. Calculation of earnings per share:
(In Thousands Except Per
Share Amounts)
Three Months Ended
March 31,
1994 1993
Net income from continuing operations $(9,362) $34,220
Less preferred stock dividends
- -
Net income from continuing operations
for computation of earnings per share (9,362) 34,220
Income (loss) from discontinued operations - (6,700)
Net income (loss) for computation of
earnings per share $(9,362) $27,520
Average shares outstanding, including
common share equivalents 34,309 34,043
Primary earnings (loss) per share:
Continuing operations $(.27) $1.00
Discontinued operations - (.19)
$(.27) $ .81
Fully diluted earnings (loss) per share:
Continuing operations $(.27) $ .98
Discontinued operations - (.19)
$(.27) $ .79
6. Commitments and Contingencies:
See Item 6(b) - Reports on Form 8-K which summarizes a Form 8-K
filed by the Registrant May 2, 1994, Items 1 and 5 of which are
incorporated herein by reference.
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Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
On April 3, 1994, the Company entered into an agreement and plan of
merger among Northrop Corporation and the Company. Pursuant to the
merger agreement, Northrop commenced a tender offer for the purchase of
all outstanding shares of Common Stock of the Company, par value $1.00
per share, at a purchase price of $62 per share net cash to the seller.
The offer expired at 12:00 midnight, New York City time, on April 15,
1994.
On April 18, 1994, Northrop announced that 32,766,109 shares
representing approximately 93.4% of all outstanding shares of common
stock of the Company, had been tendered pursuant to the offer and
accepted for purchase. The purchase of such shares resulted in
Northrop acquiring control of the Company as of April 18, 1994.
As a result of the Northrop/Grumman merger, the implementation of
the restructure plan, disclosed as of December 31, 1993, has been
temporarily delayed. However, it is likely the bulk of the plan will
be implemented during the last six months of 1994.
Merger related costs of $60 million, charged to earnings through
March 31 principally include compensation charges resulting from the
acceleration of benefits under the long term incentive plans and the
increase in the price of the Company stock.
Financial Condition
During the first quarter of 1994, common shareholders' equity
decreased by $19.7 million to $24.01 per common share from $24.55 at
December 31, 1993. At March 31, 1994, the ratio of debt to capital
(debt plus shareholders' equity) was unchanged from 23 percent at
December 31, 1993.
For the three months ended March 31, 1994, working capital
decreased $40.0 million from December 31, 1993. The decrease was due
principally to the accrual of merger related costs, offset in part by
an increase in accounts receivable and inventories. The Company had
available an aggregate of $300 million under its credit agreement and
short-term credit lines, none of which had been borrowed. This
agreement was terminated on April 15, 1994.
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Results of Operations
A summary of the results of operations and comments thereon
pertaining to the Company's business segments for the three month
periods ended March 31, 1994 and 1993 follows:
(In Millions)
First Quarter
1994 1993
SALES
Aerospace $339.1 $548.5
Electronics Systems 159.4 167.5
Information and Other Services 141.9 150.6
Special Purpose Vehicles 97.9 94.4
Corporate Items and Eliminations (94.1) (89.2)
$644.2 $871.8
OPERATING PROFIT (LOSS) FROM
CONTINUING OPERATIONS
Aerospace $ 28.0 $ 38.9
Electronics Systems 8.3 3.9
Information and Other Services 7.8 7.3
Special Purpose Vehicles 7.8 7.6
Corporate Items and Eliminations (59.3)* 4.7
$ (7.4)* $ 62.4
*Includes $60 million of merger related costs.
Consolidated sales for the quarter ended March 31, 1994 of $644.2
million decreased $227.6 million (26%) from the comparable 1993
quarter. Operating profits from continuing operations, before
interest, taxes and merger related costs decreased $9.8 million to
$52.6 million from $62.4 million for the quarter. First quarter 1994
results include $60 million pretax of merger related costs. Exclusive
of these costs, operating margins for the quarter improved to 8.2
percent from 7.2 percent one year ago while net income from continuing
operations decreased $4.6 million to $29.6 million from $34.2 million
in the 1993 quarter as a result of the decreased sales volume. Merger
related costs in 1994 of $39 million after tax resulted in a net loss
of $9.4 million for the quarter. A $6.7 million loss from discontinued
operations recorded in the first quarter of 1993, brought net income
for the 1993 quarter to $27.5 million.
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Aerospace segment sales totaled $339.1 million for the first
quarter of 1994, a decrease of $209.4 million (38%) from the 1993
total. Operating income decreased $10.9 million to $28.0 million from
$38.9 million a year ago. However, operating margins for the 1994
quarter improved to 8.3 percent from 7.1 percent in 1993. The
reduction in sales and profits were attributable to lower F-14
remanufacturing and A-6 modification sales, a decrease in E-2C Foreign
aircraft deliveries from one to none and fewer deliveries of
aerostructures components.
Electronics Systems segment sales totaled $159.4 million in the
first quarter, a decrease of $8.1 million (5%) from the 1993 total, due
principally to lower simulation/trainers revenues, offset by improved
sales on the Joint STARS program. Operating profits more than doubled
from $3.9 million to $8.3 million in the quarter primarily due to Joint
STARS program profits.
First quarter 1994 Information and Other Services segment sales of
$141.9 million decreased $8.7 million from $150.6 million in 1993.
Operating profits of $7.8 million increased $500,000 from $7.3 million
in 1993. The sales decline was related to the Space Station Program
Support contract which NASA scaled back and downsized significantly in
December 1993, and ultimately awarded this management job to Boeing.
Special Purpose Vehicles segment sales totaled $97.9 million in the
1994 first quarter, an increase of $3.5 million (4%) from $94.4 million
in the year-ago quarter. The increase was due to increased revenues in
Postal Truck Vehicles and higher unit deliveries of aluminum trucks.
Operating profits for the first quarter were $7.8 million compared to
$7.6 million in the 1993 quarter. The increase reflects improved
profits on the Postal Truck Vehicles program.
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PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits - See Note 5 of Notes to Consolidated Financial
Statements on Page 5 for computation of earnings per
share.
(b) Reports on Form 8-K:
The Registrant filed a report on Form 8-K dated May 2, 1994
covering Item 1, Changes in Control of Registrant, of Form 8-K,
relating to the Registrant entering into an Agreement and Plan of
Merger among Northrop Corporation and the Registrant, pursuant to
a tender offer for the purchase of all outstanding shares of
Common Stock of the Registrant.
This Form 8-K also covered Item 5, Other Events, which described
the current status of the five putative class actions filed
against the Registrant and others dealing with various allegations
related to recent merger/tender offer activities. Also disclosed
was a new, sixth case similar in nature to the others as well as
three more additional complaints where the registrant has yet to
receive the summons and complaint.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
GRUMMAN CORPORATION
(Registrant)
Date May 13, 1994 By /s/ N. P. Busi
N. P. Busi
Vice President and Controller
Principal Accounting Officer
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